This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

Abstract:

This case is about the issue of sustainability rhetoric and greenwashing. In
March 2006, The Body Shop International Plc. (Body Shop), a retailer of
natural-based and ethically-sourced beauty products, announced that it had
agreed to an acquisition by the beauty care giant L'Oréal SA1 (L'Oréal) in a cash
deal worth £652 million (US$ 1.14 billion).

The announcement brought in its wake
a spate of criticism against Body Shop and its founder, Dame Anita Roddick (Roddick).
Body Shop was regarded as a pioneer in modern corporate social responsibility
(CSR) practices. The company was also strongly associated with Roddick's
social activism.

Since its inception, it had endorsed and
championed various social issues such as opposition to animal
testing, developing community trade, building self-esteem,
campaigning for human rights, and protection of the planet.
Through these initiatives, the company had cultivated a loyal
base of customers who shared these values.

L'Oréal, on the other hand, had been severely criticized by
activists for allegedly testing its cosmetics on animals,
exploiting the sexuality of women, and selling its products by
making women feel insecure. Moreover, Nestlé owned 26 percent of
L'Oréal and Nestlé was one of the most boycotted companies in
the world for its alleged unethical business practices and
aggressive promotion of baby milk in developing countries.

Some of Body Shop's critics and customers said that they felt
betrayed by the deal as Roddick had previously been vocal in her
criticism of companies like L'Oréal. They called for a boycott
of Body Shop's products. However, Body Shop and Roddick defended
the deal by saying that the acquisition by L'Oréal would not
compromise Body Shop's ethics; the merger would, in fact, give
Body Shop a chance to spread its values to L'Oréal. L'Oréal also
announced that Body Shop's values would not be compromised and
that it would continue to operate as an independent unit.

This case discusses the reactions of consumers, activists, and
CSR experts to the acquisition of Body Shop by L'Oréal. The
acquisition throws up some questions such as: Is Body Shop
guilty of greenwashing? Does it have the influence to extend its
values to L'Oréal? The case also looks into the issue of whether
L'Oréal was trying to improve its own image and to buy CSR
through this deal.

Issues:

» Understand the issue of sustainability rhetoric and greenwashing with regard
to the acquisition of Body Shop by L'Oréal

» Understand the challenges faced by a company in building a corporate image and
brand on the social marketing concept

» Appreciate the importance of the cultural and CSR factors in mergers and
acquisitions vis-à-vis financial and strategic parameters

1] L'Oréal SA, headquartered in Clichy, France,
is the world's leading cosmetics and beauty company. Its portfolio includes
various brands in the field of cosmetics, concentrating on hair color, skin
care, sun protection, make-up, perfumes, and hair care. In 2005, L'Oréal's
revenue was €14.53 billion and it earned a net income of €1.639 billion. As
of December 2005, it employed 52,080 people.